What terms should be included to protect my business?

When setting up a business, having effective contracts in place is essential.

Here's a 'checklist' of terms which should be included in your contracts in order to protect your business and its legal position:

• Are the payment terms clear and do they specify the dates and times for payments and how are the payments going to be made?
• Where different countries are involved, what currencies will be used and, if it becomes necessary, what exchange rate will apply to commercial aspects of the transaction
• Is there a need for advance payments or a deposit where the supplier needs to undertake a significant amount of work or investment before the main part of the price is paid?
• As an incentive for punctual payment there should be interest provisions and even the power for the supplier to cease or suspend work if payments are seriously overdue?
• On the same issue, where a specific product is being supplied, should the supplier reserve ownership of the product until such time as it has been paid for even if it has been delivered to the customer (retention of title)
• For larger contracts, is any form of guarantee from the customer needed, eg personal guarantees of parent company guarantees in the case of group companies
• From the customer’s point of view, for a larger project, such as a construction or property development, should that customer be looking for some form of performance bond or third party security that the supplier will deliver what was promised?
• In terms of performance and standards, what sort of warranty or guarantee will the supplier be required to give and for how long?
• Are liquidated damages appropriate where the performance of the contract or the product being supplied is critical from the point of view of the customer?
• Are prices fixed or are price adjustment clauses needed?
• Powers of termination should be included for ongoing contractual arrangements or where the supplier defaults in its basic obligations or becomes insolvent
• Controls may be needed regarding the supplier’s performance obligations- eg any subcontractors should be approved in advance, specified materials are to be used, specific quality certifications to be attained (eg BS or EU standards)
• Performance review and “best value “ clauses may also be relevant;
• Are limits of liability going to be agreed from the point of view of the supplier and will force majeure provisions also be included?
• Is any form of exclusivity required, so far as consistent with competition laws, either from the supplier or for the extent to which the customer can distribute or resell the product to third parties
• Intellectual Property: is any particular form of  intellectual property important to the contract, eg software,  and if so, who will own it and what rights are being granted to use it
• Dispute resolution procedures may also be relevant so long as they cannot be used in artificial situations to delay payments which are due to the supplier.

For advice on your specific circumstances, please don't hesitate to get in touch with our bright Company & Commercial Lawyers. Call us on 01202 49955 or fill out the form at the top of this page to contact us. We offer a free initial appointment for all new clients.